Question 1

Some low-income countries generally remain poor because

Accepted Answer

A)  their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. 
B)  they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. 
C)  they are poorly endowed with natural resources, which are essential for long-term growth. 
D)  when the average income level is low, workers have little incentive to earn higher incomes. 
A)  their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. 
B)  they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. 
C)  they are poorly endowed with natural resources, which are essential for long-term growth. 
D)  when the average income level is low, workers have little incentive to earn higher incomes.

Question 2

Which of the following is true of sub-Saharan Africa?

Accepted Answer

A)  Sub-Saharan Africa has received very little foreign aid and as a result, the poverty rate in the region is high. 
B)  Sub-Saharan Africa has received more foreign aid than any other region and nonetheless the poverty rate in the region remains high. 
C)  The economic freedom rating of sub-Saharan African countries is high, but the poverty rate in the region is still the highest in the world. 
D)  the reduction in the poverty rate in sub-Saharan Africa has been faster than for other regions of the world during the past quarter of a century. 
A)  Sub-Saharan Africa has received very little foreign aid and as a result, the poverty rate in the region is high. 
B)  Sub-Saharan Africa has received more foreign aid than any other region and nonetheless the poverty rate in the region remains high. 
C)  The economic freedom rating of sub-Saharan African countries is high, but the poverty rate in the region is still the highest in the world. 
D)  the reduction in the poverty rate in sub-Saharan Africa has been faster than for other regions of the world during the past quarter of a century.

Question 3

An open capital market affects a nation's economic growth by

Accepted Answer

A)  channeling capital into productive projects and away from wasteful projects. 
B)  rewarding investors who find the most productive projects and invest in them. 
C)  making the lowest-cost capital available from around the world. 
D)  all of the above. 
A)  channeling capital into productive projects and away from wasteful projects. 
B)  rewarding investors who find the most productive projects and invest in them. 
C)  making the lowest-cost capital available from around the world. 
D)  all of the above.

Question 4

How can increased investment help a country achieve increased economic growth? What costs are involved?

Accepted Answer

Countries can profit from investment in

Question 5

The growth records of Japan and Hong Kong during the last fifty years indicate that an economy can grow rapidly without

Accepted Answer

A)  securely defined property rights. 
B)  abundant domestic natural resources. 
C)  significant capital formation. 
D)  adopting modern technology. 
A)  securely defined property rights. 
B)  abundant domestic natural resources. 
C)  significant capital formation. 
D)  adopting modern technology.

Question 6

If real GDP is increasing more rapidly than population,

Accepted Answer

A)  population must be declining. 
B)  the country will have to export more than it imports. 
C)  the general level of prices must be increasing. 
D)  per capita real GDP will be increasing. 
A)  population must be declining. 
B)  the country will have to export more than it imports. 
C)  the general level of prices must be increasing. 
D)  per capita real GDP will be increasing.

Question 7

Investment in both physical and human capital tends to enhance economic growth because it generally

Accepted Answer

A)  increases consumption during the current period. 
B)  makes it possible for individuals to produce more goods and services per hour worked. 
C)  encourages firms to expand output by employing more low productivity workers. 
D)  encourages workers to unionize and thereby fight for higher wages. 
A)  increases consumption during the current period. 
B)  makes it possible for individuals to produce more goods and services per hour worked. 
C)  encourages firms to expand output by employing more low productivity workers. 
D)  encourages workers to unionize and thereby fight for higher wages.

Question 8

An increase in per capita income will generally lead to

Accepted Answer

A)  more material goods, but a decline in the quality of the environment. 
B)  a reduction in life expectancy because working conditions are less desirable. 
C)  an increase in the number of hours worked by residents. 
D)  an increase in the living standards of most people. 
A)  more material goods, but a decline in the quality of the environment. 
B)  a reduction in life expectancy because working conditions are less desirable. 
C)  an increase in the number of hours worked by residents. 
D)  an increase in the living standards of most people.

Question 9

Why is competition important? Do business firms operating in competitive markets have a strong incentive to serve the interests of consumers? Do business owners have to care about the interests of others if they are going to provide them with helpful products and services?

Accepted Answer

Competition is important because it prov

Question 10

When competition is present and private ownership rights are clearly defined and securely enforced by the legal system, business firms will have a strong incentive to

Accepted Answer

A)  innovate and develop better products and lower cost production methods. 
B)  spend time attempting to plunder (take) the resources of others. 
C)  engage in wasteful activities that increase the cost of producing goods and services. 
D)  use resources during the current period rather than conserving them for the future. 
A)  innovate and develop better products and lower cost production methods. 
B)  spend time attempting to plunder (take) the resources of others. 
C)  engage in wasteful activities that increase the cost of producing goods and services. 
D)  use resources during the current period rather than conserving them for the future.

Question 11

In recent years, wireless cellular telephones have been replacing land-line phone service. This is an example of

Accepted Answer

A)  economies of scale. 
B)  division of labor. 
C)  creative destruction. 
D)  entry barriers into a market. 
A)  economies of scale. 
B)  division of labor. 
C)  creative destruction. 
D)  entry barriers into a market.

Question 12

During the past several decades, foreign aid to sub-Saharan Africa

Accepted Answer

A)  has been smaller than the aid to other regions, but the reduction in the extreme poverty rate has been larger in Africa than in other areas of the world. 
B)  has been larger than the aid to other regions, but the reduction in the extreme poverty rate has been smaller in Africa than in other areas of the world. 
C)  has declined and as a result the poverty rate in sub-Saharan Africa has risen sharply. 
D)  has risen and, as a result, the poverty rate in sub-Saharan Africa has declined substantially. 
A)  has been smaller than the aid to other regions, but the reduction in the extreme poverty rate has been larger in Africa than in other areas of the world. 
B)  has been larger than the aid to other regions, but the reduction in the extreme poverty rate has been smaller in Africa than in other areas of the world. 
C)  has declined and as a result the poverty rate in sub-Saharan Africa has risen sharply. 
D)  has risen and, as a result, the poverty rate in sub-Saharan Africa has declined substantially.

Question 13

Trade is a source of economic growth and prosperity because it

Accepted Answer

A)  moves goods, services, and resources from people who value them less to people who value them more. 
B)  helps trading partners achieve larger outputs through division of labor, specialization, and adoption of methods of mass production. 
C)  serves as a zero-sum game in which the gains to one trading partner are offset by losses to the other trading partner. 
D)  both a and b, but not c. 
A)  moves goods, services, and resources from people who value them less to people who value them more. 
B)  helps trading partners achieve larger outputs through division of labor, specialization, and adoption of methods of mass production. 
C)  serves as a zero-sum game in which the gains to one trading partner are offset by losses to the other trading partner. 
D)  both a and b, but not c.

Question 14

Which of the following is true?

Accepted Answer

A)  Poor countries are unable to ignite the growth process unless they receive financial aid from richer countries. 
B)  Countries that fail to adopt institutions and policies supportive of trade, entrepreneurial discovery, and private investment will remain poor in the foreseeable future. 
C)  Countries that lack an abundance of natural resources have been unable to grow and achieve high income levels. 
D)  Countries with a large population relative to their land area are destined to remain poor. 
A)  Poor countries are unable to ignite the growth process unless they receive financial aid from richer countries. 
B)  Countries that fail to adopt institutions and policies supportive of trade, entrepreneurial discovery, and private investment will remain poor in the foreseeable future. 
C)  Countries that lack an abundance of natural resources have been unable to grow and achieve high income levels. 
D)  Countries with a large population relative to their land area are destined to remain poor.

Question 15

Which of the following would be most likely to improve the standard of living of people in less-developed nations?

Accepted Answer

A)  the development of strong labor unions 
B)  an increase in foreign investment 
C)  an increase in the share of the population under fifteen years of age 
D)  higher tariffs and the imposition of other restraints designed to restrict international trade 
A)  the development of strong labor unions 
B)  an increase in foreign investment 
C)  an increase in the share of the population under fifteen years of age 
D)  higher tariffs and the imposition of other restraints designed to restrict international trade

Question 16

A "stable monetary environment" is used to describe monetary policy consistent with

Accepted Answer

A)  keeping the money income of citizens constant while population grows. 
B)  keeping the rate of inflation low. 
C)  minimizing the year-to-year fluctuations in the inflation rate. 
D)  both b and c. 
A)  keeping the money income of citizens constant while population grows. 
B)  keeping the rate of inflation low. 
C)  minimizing the year-to-year fluctuations in the inflation rate. 
D)  both b and c.

Question 17

When competition is present and property rights secure, people will be encouraged to

Accepted Answer

A)  plunder the resources of others. 
B)  pay the lowest possible wages. 
C)  provide others with things that they value in exchange for income. 
D)  Invest in other countries where markets are less competitive and property rights less secure. 
A)  plunder the resources of others. 
B)  pay the lowest possible wages. 
C)  provide others with things that they value in exchange for income. 
D)  Invest in other countries where markets are less competitive and property rights less secure.

Question 18

Which of the following would be most likely to improve the standard of living of the residents of a less-developed country?

Accepted Answer

A)  the development of strong labor unions 
B)  a sharp increase in the legal minimum wage 
C)  an increase in expenditures on education and capital investment 
D)  rapid growth rate of the money supply 
A)  the development of strong labor unions 
B)  a sharp increase in the legal minimum wage 
C)  an increase in expenditures on education and capital investment 
D)  rapid growth rate of the money supply

Question 19

How does private ownership and a competitive market affect the efficiency of economic organization?

Accepted Answer

Private ownership of resources, includin

Question 20

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

Accepted Answer

Economic theory suggests that marginal t

Exam 16: Creating an Environment for Growth and Prosperity

Some low-income countries generally remain poor because

Which of the following is true of sub-Saharan Africa?

An open capital market affects a nation's economic growth by

How can increased investment help a country achieve increased economic growth? What costs are involved?

The growth records of Japan and Hong Kong during the last fifty years indicate that an economy can grow rapidly without

If real GDP is increasing more rapidly than population,

Investment in both physical and human capital tends to enhance economic growth because it generally

An increase in per capita income will generally lead to

Why is competition important? Do business firms operating in competitive markets have a strong incentive to serve the interests of consumers? Do business owners have to care about the interests of others if they are going to provide them with helpful products and services?

When competition is present and private ownership rights are clearly defined and securely enforced by the legal system, business firms will have a strong incentive to

In recent years, wireless cellular telephones have been replacing land-line phone service. This is an example of

During the past several decades, foreign aid to sub-Saharan Africa

Trade is a source of economic growth and prosperity because it

Which of the following is true?

Which of the following would be most likely to improve the standard of living of people in less-developed nations?

A "stable monetary environment" is used to describe monetary policy consistent with

When competition is present and property rights secure, people will be encouraged to

Which of the following would be most likely to improve the standard of living of the residents of a less-developed country?

How does private ownership and a competitive market affect the efficiency of economic organization?

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

The Economic Approach

A : Some Tools of the Economist

B : Some Tools of the Economist

A : Supply, Demand, and the Market Process

B : Supply, Demand, and the Market Process

A : Supply and Demand: Applications and Extensions

B : Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, Incentives, and Secondary Effects

A : Money and the Banking System

B : Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

A : Costs and the Supply of Goods

B : Costs and the Supply of Goods

A : Price Takers and the Competitive Process

B : Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A : Price-Searcher Markets With High Entry Barriers

B : Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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